Bagley and Bagley
[2008] FMCAfam 405
•28 April 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAGLEY & BAGLEY | [2008] FMCAfam 405 |
| FAMILY LAW – Property – death of spouse – proceedings continued by Estate – surviving spouse’s future needs – modest asset pool. |
| Family Law Act 1975 (Cth) ss.75(2), 79, 79(8) |
| Allen & Allen [2008] FMCAfam 18 Pitcher & the Estate of Pitcher [2007] FamCA 208 Parrott v Public Trustee of NSW (1993) 17 Fam LR 785, (1994) FLC 92-437 Tasmanian Trustees Ltd v Gleeson (1990) 14 Fam LR 189, (1990) FLC 92-156 Smythe & Smythe [2007] FMCAfam 143 Smythe & Smythe [2007] FamCA 1212 Ferrero & Ferrero (1993) FLC 92-335 Ford & Marchant [2001] FamCA 1585 Menzies & Evans (1988) 12 Fam LR 519 |
| Applicant: | ESTATE OF MS BAGLEY |
| Respondent: | MR BAGLEY |
| File Number: | PAC1591/2007 |
| Judgment of: | Henderson FM |
| Hearing date: | 5 March 2008 |
| Date of Last Submission: | 18 March 2008 |
| Delivered at: | Parramatta |
| Delivered on: | 28 April 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Haughton |
| Solicitors for the Applicant: | Ian Harper & Co |
| Counsel for the Respondent: | Mr Thistleton |
| Solicitors for the Respondent: | Sheathers Lawyers |
ORDERS
The Case Guardian and Executor of the Estate of the Late Ms Bagley to within 7 days of today’s date sign all documents necessary to transfer the Estate’s interest in the property at Property T to the Husband at the Husband’s cost.
Contemporaneously with the transfer the Husband to pay to the Estate of the Late Ms Bagley the sum of $2,000.
Thereafter the parties retain all assets presently in their possession.
In the event that the Husband fails to pay the sum of $2,000 to the Estate within 6 calendar months of today’s date the Husband is ordered to place the property at Property T on the market for sale by way of private treaty for the best price reasonably attainable and from the sale proceeds in the following order:
(a)discharge any mortgage currently in existence in respect of the home;
(b)pay agent’s commission, solicitors costs, usual conveyancing costs;
(c)the sum of $2,000 to the Estate; and
(d)the balance to the Husband.
In the event that either party fails, refuses or neglects to execute any deed, document or instrument necessary to give effect to these orders, then pursuant to s.106A, a Registrar or Deputy Registrar of the Federal Magistrates Court of Australia is hereby appointed to execute all deeds, documents and instruments in the name of the defaulting party and to do all such acts and things necessary to give validity and operation to such deeds, documents and instruments.
IT IS NOTED that publication of this judgment under the pseudonym Bagley & Bagley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAC1591/2007
| ESTATE OF MS BAGLEY |
Applicant
And
| MR BAGLEY |
Respondent
REASONS FOR JUDGMENT
The matter of Bagley commenced to be heard on 5 March 2008 and was completed on 18 March 2008 when submissions were delivered.
Ms Haughton of Counsel acted on behalf of the Estate and
Mr Thistleton of Counsel acted on behalf of the Respondent Husband.
The Wife commenced these proceedings on 21 September 2006 by way of Application, Affidavit and a Financial Statement.
On 6 November 2006 the Wife died. These proceedings are continued pursuant to s.79(8) of the Family Law Act. Mr P, who is the Wife’s executor and trustee and her brother has continued the proceedings on behalf of the Estate.
Short Chronology
The Husband was born in 1946 and the Wife was born in 1946. Each would have been 61 years of age.
In 1969 the parties married.
The Husband commenced work [in the Retail Industry] in 1973.
In 1975/1976 the parties purchased their property at Property T. They have lived in that home for the entirety of their married life.
The Wife has a significant history of ill health commencing from at least 1980. Her initial ill health was chronic endometriosis which not only caused her significant pain at the time of menstruation but ultimately resulted in a complete hysterectomy in February 1981.
In September 1981 the Wife was diagnosed with rheumatoid arthritis.
On 12 September 1988 the Wife suffered a stroke. The Wife ceased full time work within a short period of time.
The Wife’s Estate asserts she received $38,471.76 in December 1986 from her late mother’s Estate which was applied to the mortgage and living expenses. There was no documentary evidence to support this assertion.
In 1990 the Husband was retrenched from his employment at [D] and the parties incorporated a company called [J] Pty Ltd (“the company”).
On 17 January 1992 the parties borrowed $25,000 secured against the home in the name of the company. They borrowed a further sum of $21,000 on 21 January 1993.
In February 2000 the Husband purchased a business known as [B] Pty Ltd. The Husband is the sole shareholder and director of that business.
In 2001 the Husband engages in various courses in relation to [alternative medicine] and commences a business known as “[E]”.
The Wife receives an invalid pension in 2001 and the Husband a carer’s pension. The Wife receives home help in 2001.
In 2002 the Wife has a foot reconstruction.
In 2003 the parties are notified by Centrelink concerning the Wife’s ineligibility for social security.
In May 2004 the parties separate. The Husband moved from the matrimonial home and rented for three years at a cost of $300 per week.
The Husband’s evidence is that he did not regard the marriage as over as at May 2004. The Wife did.
The Wife remained in the matrimonial home but her ill health was such that she had to retire to a nursing home.
The Wife appointed her brother, Mr P, as her Attorney by way of a General Power of Attorney in December 2005.
Upon the parties separation the Wife received an appropriate Centrelink benefit and other associated benefits.
The Wife files her Application for Divorce on 19 April 2006.
The Wife attends [N] Hospital due to her ill health. She is transferred to [H] on 12 September 2006.
The Wife makes a new Will on 21 September 2006.
The Wife files an Application on 21 September 2006 for her brother to be appointed as her Case Guardian.
The Decree Nisi becomes absolute on 22 September 2006.
In October 2006 the Wife severs the joint tenancy of the matrimonial home.
The Husband files an Amended Response in October 2006.
The Wife is placed in high level residential care in October 2006.
On 6 November 2006 the Wife dies.
The Husband does not reoccupy the matrimonial home until September 2006 despite the fact that the Wife only occupied the home from separation in May 2004 for a period of five weeks due to her significant ill health.
Asset pool
The parties have a very modest asset pool and have no children.
The assets of the parties are:
ASSETS Matrimonial home $340,000 Holden Commodore motor vehicle $500 Property P Time Share $3,000 Husband’s CBA Account $10,018 Jewellery Unknown Estates Bank Account $119 Contents of Home $10,000 Husband’s paid legal fees $16,000 Estate’s paid legal fees $16,247 Husband’s Superannuation $50,947
The Wife asserts the Husband’s shares in [J] Pty Ltd and [B] Pty Ltd is, at minimum, the value of the money in the bank account at the hearing being $41,041.20. The Husband says the value of those businesses is nil.
The liabilities of the parties are:
DEBTS Mortgage secured over former matrimonial home $62,436 Husband’s ANZ Visa card $12,858 Husband’s Citibank Visa card $7,582 Estate’s debt to the Executor and Trustee, Mr P $2,180
The assets of the parties, not including the money in the [J] Pty Ltd and [B] Pty Ltd accounts, are $446,831.
Adding the $41,041 in the [B] account brings the possible assets to $487,872.
The debts of the parties total $85,056.
Thus the asset pool is either $361,775 without the [B] money or, at best, is $402,816 including the [B] money.
This is the total sum of the parties’ asset base after a marriage approaching forty years.
Evidence
The evidence for the Estate of the Wife is as follows:
a)Amended Application filed 9 November 2006;
b)Affidavit of Mr P filed 8 February 2008;
c)Financial Statement filed by Mr P on 5 February 2008;
d)Wife’s Affidavit filed 21 September 2006.
The Husband’s evidence was as follows:
a)Affidavit filed 21 February 2008;
b)Amended Financial Statement filed 21 February 2008;
c)I did not read the Affidavits of his supporting witnesses.
Mr P and the Husband were each examined and cross examined.
There were a significant number of voluminous exhibits tendered by the parties:
a)Estate’s Exhibit 1: Four bundles of bank accounts for [J] Pty Ltd and [B] Pty Ltd.
b)Estate’s Exhibit 2: Centrelink Form “Separation Details” signed by the Husband in May 2004.
c)Estate’s Exhibit 3: Two Accountant’s reports of the Husband’s companies.
d)Estate’s Exhibit 4: Two internet downloads of comments made by the Husband in relation to courses he had attended.
e)Husband’s Exhibit 1: Document signed by Ms L and Mr Bagley dated 19 October 2006.
f)Husband’s Exhibit 2: Two tagged balance sheets of his companies.
g)Husband’s Exhibit 3: Documents produced under subpoena from [H] Hospital, [W] Hospital and [N] Hospital.
h)Husband’s Exhibit 4: Specific documents produced under subpoena from [H] Hospital, [W] Hospital and [N] Hospital which had been tagged by the Husband’s legal representatives.
i)Husband’s Exhibit 5: A letter dated 21 December 2006 from the Husband’s Solicitor to the Wife’s Solicitor providing updating financial statements and accounts for the Husband and his companies [J] Pty Ltd and [B] Pty Ltd for the years 2003-2004 and 2004-2005.
The thrust of the Estate’s case is that the Husband has significantly understated his income and financial resources and was not a witness of truth.
Part of the Estate’s case was that the Husband’s assertions that he did not regard the marriage as over in 2004 were inconsistent with documents he signed for Centrelink and as such his evidence at this hearing is not to be relied upon.
After seeing the Husband give evidence and assessing all the evidence before the Court I found to the contrary.
It is clear from the subpoena material that the Wife suffered significant ill health throughout the marriage.
The Wife first attended the [S] Health Service on 21 December 1980 which is consistent with the Husband’s evidence. The Wife had no less than 21 inpatient episodes from that time until she was admitted to a nursing home after separation. There were five volumes of records relating to Wife consisting of up to 3000 pages of medical notes.
The [H] Hospital notes show the Wife first commenced attending the [H] health area on 19 May 1990 where she stayed for three to four days and was last with them at her death on 6 November 2006.
The [N] Hospital records indicate that towards the end of the Wife’s life there were specific additional contact precautions to be taken when approaching due to her condition of septic arthritis. This was ultimately her cause of death – a painful, debilitating and extremely aggressive disease.
[S] Health Service provided details of the Wife’s treatment and diagnosis:
a)July 1986: Gastroenteritis.
b)30 April 1989 to 5 May 1989: Angina and peptic ulcer.
c)19 November 1998 to 24 November 1998: Cholelithiasis, laparoscopic cholecystectomy, and liver biopsy.
d)17 June 2003 to 26 September 2003: Chronic ulcer to right elbow and ulcer to left ankle, pedicle flap right forearm and elbow, split skin graft to ankle with donor skin site right thigh.
e)31 October 2005 to 16 March 2006: Leg ulcers, debridement and washout of right shin and ankle, split skin graft to right leg and right heel.
f)14 April 2006 to 23 May 2006: Failed right ankle graft, split skin graft to right ankle.
g)14 August 2006 to 12 September 2006: Sepsis, respiratory failure secondary to Staphylococcus aureus, septic arthritis.
This is a woman who has suffered ill health from as early as 1980 on the medical evidence produced by the Husband.
Mr P’s evidence
Mr P was called. He is the Wife’s brother and Executor of her Estate.
He gave evidence that he was the Executor of his mother’s Estate and recalled that the Wife received $38,471.76 referred to in his Affidavit. The Husband was unaware of this and denied that this money had been received. I accept Mr P’s evidence that that money was received by his sister from her late mother’s estate. However, that is a separate issue form what was done with the money and where that money was put. There was no documentary evidence to support the Estate’s assertion that that money was paid off the mortgage.
However, I accept that money was probably used by the parties for their joint benefit.
It became clear to me that the executor had very little knowledge of the Wife’s illnesses or her relationship with the Husband. Mr P gave evidence which I found was consistent with the Husband’s evidence that the Wife and her family were not particularly close during the marriage.
Mr P and his family came to Sydney regularly at Christmas. He also said he might have seen his sister a couple of times a year as well. His evidence was that he would drop in on his way to Sydney, have a cup of tea and a sandwich with his sister. There was no evidence that he stayed overnight or for days at a time, just a friendly drop in for a chat and Christmas celebrations. He did not go out with his sister and the Husband nor were there any joint holidays, just short visits.
The Executor’s evidence was that the home was always clean, the toilet was clean, the yard was maintained and his sister could make him a cup of tea and a sandwich and that he believed the Wife carried out the cleaning. I cannot accept that the Wife was able to carry out many household tasks apart from making a sandwich and a cup of tea whilst suffering the effects of arthritis.
In 1991 the [H] Hospital notes she had inflammatory rheumatoid arthritis and nodules, she had lesions, she was taking heparin then warfarin to thin her blood, she had pneumonia, her feet had turned due to arthritis and she underwent an operation. Mr P’s description of his sister is inconsistent with the medical records.
Mr P said he had never seen his sister unable to wash up or go to the toilet herself. I accept that he has never seen this occur. Given the limited time he spent with her this may not be surprising.
Mr P cannot say that the Wife was always able to wash-up and toilet herself because he did not live with her. Her Husband did and he is the person who tells the court there were many times the Wife could do very little for herself due to the pain and restriction of movement she suffered from.
Mr P admitted that “some days she had good days and someday she had bad days”. Begrudgingly he accepted that the Husband did the gardening which he said he had assisted with and that the Husband assisted with the preparation of the meals and cleaning up.
I did not find Mr P’s evidence assisted me in understanding how his sister’s incapacity and ill health impacted upon her capacity to contribute to the marriage including caring for the home, the gardens, the Husband and herself.
The Husband’s evidence
The Husband was called.
The Husband said that when he and the Wife separated in 2004, from his view, it was not a separation in the true sense of the word.
The Wife’s pension had been reduced to nil in 2003 due to the profits of the Husband’s company and he was not able to financially provide the Wife with the care she needed.
The Husband said he and the Wife considered his stopping work full time to care for her but that would still leave them in a parlous financial position. The Wife needed to be supported as much as possible from the benefits available under the Social Security system due to her deteriorating health.
The Husband cannot have it both ways. He and the Wife separated and lived in separate households from May 2004. The Husband maintained his own household for three years and he did not contest the divorce.
Therefore, I find that the parties separated in 2004 and the fact that the Husband did not regard that as the true separation date is quite irrelevant for these purposes.
I do not see his signing the Centrelink form on 25 May 2004 as inconsistent with his Wife’s desire to separate and lead her own life.
Secondly, I do not see it as inconsistent with the Husband’s position that he continued to have regard for and have feelings for his Wife and was there to assist her if he could.
The Wife had gold injections in late 1980’s. The Husband said that after she had her stroke in December 1988 and was hospitalised for three weeks her health really began to deteriorate.
The Husband believed the Wife’s mental health had been affected in 1981 when she had a hysterectomy because they realised then that they would never have children.
I found paragraph 56 of the Husband’s affidavit quite poignant where he said:
[Ms Bagley] did her best to enjoy life even though she was very ill.
That is consistent with the hospital notes right up until about 12 hours before her death where the nursing staff regarded her as a charming, compliant and cheerful woman. That description and the Husband’s phrase are consistent.
Much was made that the Husband failed to disclose the $41,000 in the [B] account in his Financial Statement. The Husband said he had completed his Financial Statement in relation to his assets, not the companies. I accepted his evidence. If there is any blame for that it is on the head of his legal team for failing to advise him of the extent of the disclosure required in a Financial Statement.
The Financial Statement discloses his shareholdings and part of his assets included any shareholdings that he might have, and it is clear he has shareholdings in those companies. Those monies should have been included by him in his Financial Statement but I do not accept he deliberately failed to disclose this account.
The Husband really did not resile from figures presented to him regarding his financial affairs. When it was put to him [B] had $41,000 in its accounts he readily agreed. He was open and frank with the Court.
There is a floating overdraft in relation to [B] and [J] secured over the matrimonial home. At some point the overdraft is low at other times it is high. The overdraft goes up and down.
[B] is the only operating Company and is the means by which the Husband earns his income. [J] is rarely used by him.
I do not see any evidence to suggest [B] has a market value other than as a vehicle by which the Husband earns his income and which provided the Husband and Wife the opportunity to minimise their tax during their marriage.
At present the Husband has one part time secretary. It is clear that during the marriage the Husband’s business had been much larger and had generated greater income than at present. From about 1988 only the Husband earned any income due to the Wife’s illness and that income is earnt by him due to his particular knowledge in the world of gauges. It is a key man company and without his contacts and expertise [B] is worthless to anyone else.
I did not accept Ms Haughton’s submission that the value of the Husband’s business only became apparent at the hearing. The Husband provided his tax returns under cover of the letter marked Husband’s Exhibit 5 well prior to the hearing. No issue was raised by the Estate after that information was provided because the businesses have no value.
I do not accept that the Husband failed to disclose his true financial position. These companies have absolutely no value to anyone else but the Husband who uses them as a tax effective vehicle by which he earns his income. To suggest otherwise is not correct.
It is correct that the Husband and the Wife shared income from the business and thus minimised tax. However there is no submission that the Wife was an active party in the day to day operations of the business.
Much was made by Ms Haughton of this as a further reason not to accept the Husband’s evidence and to maximise the Wife’s contribution to the parties’ property. However the Wife was party to this arrangement and she and the Husband benefited from lower taxes. The Husband is the key man in this business and the Wife had no independent understanding of the business or expertise in this area. Further her health would not have permitted her to be engaged in employment for any length of time after 1988.
It was put to the Husband that the $38,000 odd that the Estate said the Wife inherited from her mother was put into the mortgage. He did not agree nor was he able to say as he had no knowledge of this money.
I accept the Wife received the money and it was used for the family’s benefit some 22 years ago.
Today the home is still encumbered and the Husband has significant credit card debts. This supports the Husband’s evidence that the company is just able to pay him a wage sufficient to keep his head above water and that the three years he rented outside the home was a significant financial drain on his resources.
The Husband admitted that his Wife’s ill health had taken its toll on their marriage and on him. This is one of the reasons he engaged in various courses in 2001. The Estate’s Exhibit 4 are downloads from the internet depicting the Husband’s jubilation after completing these 3 day and 4 day courses and saying:
To be honest I was sceptical about helping people ‘quit cigarettes in 60 minutes’ and ‘I offer a life time guarantee’. Now after 4 days I am not only, NOT sceptical but know that I can and will help people ‘quit’ and make at least $1000 a day or more. I have been given all the tools to achieve this.
Estate’s Exhibit 4 also includes a download from the internet of the Husband after completing a clinical [alternative medicine] course where he says:
As a [occupation omitted], I find that the material on The [alternative medcicine] Club and the monthly information that is available is of great benefit both professionally and privately.
It was put to me by Ms Haughton that these downloads demonstrate the Husband has an untapped source of income as a [occupation omitted] etc of $1000 a week.
The Husband has not completed certified TAFE or other recognised course in [alternative medicine] and the like which are usually of many years duration.
He has no recognised qualifications merely some certificates issued by the organisation that ran the course. I accept the Husband’s evidence that these courses were for his edification, helped him deal with the stresses of his Wife’s illnesses and helped him to assist the Wife and perhaps relieve her of some pain and suffering by [alternative medicine] and the like. Ms Haughton’s submission was not made out on the evidence.
I do not accept the submission put by the Estate that the Husband has extra qualifications that he could use to earn an income. Clearly [B] is the only source of income.
The Husband said he supported the Wife up until the end, and in one sense he did so by moving out of the home at separation and not returning until shortly before her death. The Husband continued to maintain the home and outgoings for the Wife after separation and as they were separated I am not sure what more he could have done.
The Husband increased the overdraft twenty two days after separation by $22,000 and much was sought to be made of this. However, it is clear the Husband had to set up his own accommodation and continue his business. As the Husband continued to maintain the home and pay outgoings after separation the Wife had the benefit of this increase in the overdraft.
The Estate asserted the Wife received $7,000 from her Aunt’s estate in 2002. The Husband believed $1,200 was paid in funeral costs and the remainder of $5,800 was used to buy stereo equipment and the like. I accept the Husband’s evidence
The Husband said he gave his next door neighbour two boxes with his Wife’s jewellery as requested by Mr P and received a receipt for the two boxes. Mr P said he only received one box. No one can explain this discrepancy. I accept the Husband does not have any of his Wife’s jewellery.
I accept the Husband was distressed at not being invited to his Wife’s funeral. It is incomprehensible to me that after a marriage of nearly forty years the Wife’s family would not invite him to her funeral.
The Estate submitted this was a case where I ought to add back various amounts because the Husband failed to disclose his true financial position to the Court.
I do not accept that submission. I have formed an entirely different view on the evidence. The Husband has disclosed his financial position and when it was put to him that at the date of his latest Financial Statement was prepared [B] had $41,000 in its accounts he readily accepted that figure. I accept his evidence that tomorrow the amount could be $5,000 after he has purchased gauges on behalf of a customer, for that is the nature of his business.
The Husband gave a value of his company at $6,000 in his first Financial Statement. In his Financial Statement filed this year he failed to mention [B]. It was an error. I accept that. These companies have no value and from a perusal of the financial accounts they maybe trading in the negative.
The Husband disclosed his financial accounts to the Wife’s solicitors in 2007. They chose not to ask for any more. He carried out his obligation. It is incorrect to today say that he has failed to disclose.
It is clear that the Wife was significantly unwell for at least 28 years of their almost 40 year marriage.
The Wife suffered the affects of severe period pain, the effects of endometriosis, the anguish of a hysterectomy and realisation of not being able to have children, rheumatoid arthritis, stroke, the peptic ulcers, her ulcerated body and her general pain from this dreadful disease from which she died just past her sixtieth birthday.
There can be no doubt the Wife’s pain and suffering was intense. It is set out in the Husband’s affidavit. However, the Wife continued to work part time for a time after her stroke. The Husband said this benefited her as she was a proud woman who took care of her appearance and health and she enjoyed the company of others and having a good time. By 1993 the Wife had ceased any outside paid work completely.
It is clear that the Wife suffered extremely painful body ulcers and skin splitting in the last eight or so years of her life. I accept the Husband’s evidence in relation to his assisting her with those painful conditions prior to their physical separation.
It was submitted to me by the Estate that the parties’ contribution to their asset base in the past has been equal; that should I make these add backs for the monies used by the Husband and not disclosed as being in his company account; and that the Husband’s s.75(2) factors should be no more than 15%. I was referred to the decision in Allen & Allen [2008] FMCAfam 18, a decision of my brother Baumann FM, and the matter of Pitcher & the Estate of Pitcher [2007] FamCA 208 a decision of Loughnan JR.
The Husband’s submission is that this is a matter that fell within the decision of the Full Court of the Family Court in Parrott v Public Trustee of NSW (1993) 17 Fam LR 785, (1994) FLC 92-437 and Tasmanian Trustees Ltd v Gleeson (1990) 14 Fam LR 189, (1990) FLC 92-156. Namely where there is a very small asset pool to be divided, and although unusual, it is a matter where the remaining spouse ought to receive the entirety of the small asset pool.
This may not be a small asset pool but it is certainly a modest asset pool.
These were modest people who lived a modest but fulfilling life at least up until the Wife’s illness took over in 1993 when she ceased any outside employment.
Despite Ms Haughton’s best efforts to convince me the Husband has spent many thousands of dollars during the marriage and post separation and I should add those amounts back, and that he has failed to disclose his real income earning potential and asset base, I am not persuaded that this matter is anything other than as submitted to me by Mr Thistleton, a case about a modest family and asset pool.
At best the asset pool after a thirty five year marriage is $402,816 if I include the money in the [B] account or $361,775 if I do not.
Why is the asset base so small? I do not find, as submitted by the Estate, it is because the Husband wasted money, wilfully hid assets or minimised the assets. It is because the Wife’s illness was of such a pervading nature that it had a significant affect on the family in that the Wife was unable to contribute financially to the asset pool by working after 1993 and this was left to the Husband.
The Husband could not work to his maximum capacity due to the necessary support he had to give his Wife. The Husband had to carry out all physical work around the home and the Wife’s illness was a financial and emotional drain on the family as a whole.
The Wife had significant hospitalisation from 1980 to her death. Hospitalisation is just one aspect of ill health. There must have been ill health prior to and post the hospitalisation, and who was available to care for the Wife, take her many medical appointments, attend the pharmacy and various health professionals? The Husband. Not her family, not her brother, but her Husband.
Mr P’s evidence only confirmed that it was the Husband and Wife who maintained their home and finances. It cannot have been any other way. This is a modest asset pool and these parties lived a modest lifestyle.
The manner in which this matter has been run has diminished the asset pool. Approximately $32,000 has been expended in legal costs to date of an asset pool of $400,000 at best.
That the parties had to obtain a valuation of the home bespeaks of the poor relationship between these men. That the Husband was not invited to attend the Wife’s funeral bespeaks the poor relationship between these men. This is not a non disclosure case. I accept that submission from Mr Thistleton. I find this is a case of men who have little regard for each other. There will be no adding back.
What is the asset pool? I find the pool to be $361,775 that is the pool without the [B] money. I do not accept that the money in that account when the Husband filed his Financial Statement was matrimonial property. It is the working capital of a company and I accept the figure could be zero at times.
I am greatly assisted by the decision of my brother Halligan FM in the matter of Smythe & Smythe [2007] FMCAfam 143. That decision went on appeal. It was thereafter called Smythe & Smythe.
His Honour Justice Coleman, the Appeal Judge upheld the appeal on one point only namely the value of the asset pool for division. In His Judgment, Smythe & Smythe [2007] FamCA 1212, His Honour said at paragraph 26:
His Honour ( FM Halligan ) then referred to the cases to which Counsel at trial had referred him and from which he recorded a number of deductions, they being:
a) It must be presumed from the enactment of s.79(8) that the legislature intended that one party to a marriage which has broken down to the point that proceedings have been commenced for orders altering the interests of the parties in property should not profit by the fortuitous death of the other party prior to the determination of those proceedings.
b) However, it is clear that the death of one party has a profound effect upon the balance of the s.75(2) factors.
c) The deceased has a prima facie moral entitlement to the share gained by contribution during his or her lifetime and, if so desired, to dispose of the same by will to persons who are strangers to the marriage.
d) The size of the pool of divisible assets, the level of future need of the surviving spouse, and the extent to which the surviving spouse’s contribution based entitlement will meet that need, are important factors in determining the extent of any adjustment to the surviving spouse. [Reasons for Judgment, AB, page 23, par 61(a) – (d)]
His Honour went onto to say at paragraph 27:
…With respect to the learned Federal Magistrate, the propositions can be comfortably accommodated within the statutory framework which governed the proceedings before him.
In the decision by my brother Halligan FM he found that the parties’ contribution based entitlement in the past was 55:45 favouring the Wife who was the surviving spouse. His Honour then found that he would adjust the contribution based entitlement of the Wife by a further sum of 31.4% for 75(2) factors.
His Honour Justice Coleman did not adjust or otherwise interfere with the assessment and finding of the contribution based entitlement or the adjustment for s.75(2) factors. His Honour Justice Coleman said at paragraph 69:
…It would be immediately apparent that the learned Federal Magistrate’s award represented the “top of the range”. The more relevant issue is whether it fell beyond the “top” of that range.
He found that the Court was not persuaded that in applying the appropriate appellate principles the Federal Magistrate erred in the exercise of discretion in the determination of the appropriate s.75(2) adjustments at 34.5%. Justice Coleman said His Honour FM Halligan was entitled to find that the Husband’s death had a profound effect on the balance of the s.75(2) factors and that there were no other competing or other factors within the ambit of s.75(2)(e)(ii) or s.75(2)(e) which affected that profound effect upon the balance of the s.75(2) factors.
In the case before Federal Magistrate Halligan the parties had no children of their own but the Husband and Wife each had children from their prior relationships. This was their second marriage.
Proceeding under s.79(8) due to the death of a party may be continued if the Court is of the opinion that it would have made an order in respect of their property if the deceased had not died.
The Court must be satisfied that it is appropriate to make the order. I am satisfied from the facts set out that had the Wife not died this Court would have exercised its discretion to make an order under s.79(4) and therefore the proceedings have been properly brought and I should exercise my discretion.
The law
This is a property application. I am required under the law to take a four-stage approach under s.79; the decision of Ferrero & Ferrero (1993) FLC 92-335.
The first stage is to identify the matrimonial property, its value and nature which I have done at the beginning of this judgment
The second stage is to assess the value of the parties' contributions expressed as a percentage of the value of their assets to the acquisition, maintenance, conservation and renovation of their matrimonial property, having regard to the factors under s.79(1)(a), (b) and (c).
a)Section 79(1)(a) is an assessment of the parties direct financial contribution;
b)Section 79(1)(b) is an assessment of the indirect contribution; and
c)Section 79(1)(c) is an assessment of the value of each parties' contribution as a parent and homemaker during the marriage.
The third stage under s.79(4)(e) is to determine whether, having regard to the factors under s.75(2), I ought vary the assessed percentage entitlement of either party to take into account their future needs. Clearly there is none for the deceased. Therefore the s.75(2) factors are only in favour of the respondent.
The fourth stage is to look back at the consequences of the proposed orders to determine if they are just and equitable in all the circumstances.
In the decision of the Parrot v the Public Trustee of New South Wales (1993) 17 FLR 785 the Full Court found that the trial Judge’s discretion had miscarried in that he had failed to have regard to the size of the asset pool and the resulting monetary amount which would be available to the surviving spouse was so meagre that his discretion had miscarried. In Parrott there was a very small asset pool. Such is the case before me.
Due to inflation and time the monetary amount for distribution in Parrott was $91,000 and is $361,000 before me. The difference in the monetary amount does not affect the principles in Parrott. An asset pool of $361, 000 is a modest asset pool in 2008 in Sydney. In the Parrott case the marriage was only nine years. Here it is approaching 40 years.
I concur with my brother Halligan FM that where the pool of divisible assets comprises a normal suburban home and little else a significant adjustment in the surviving spouse’s favour may be warranted, even though the value of that home in present day dollars may be many times greater than the values in Parrott and other cases where considerable relative generosity to the surviving spouse was held to be appropriate.
Looking at the past contributions of the parties, I accept that the Wife received $36,000 from her mother’s estate in 1986. However, I am unable to make a finding that that money was used to reduce the mortgage. I accept this inheritance was used for the parties benefit.
I find that the Husband was the main breadwinner throughout the marriage due to the Wife’s significant ill health, pain, significant periods of hospitalisation and in attending specialists, GPs and the like. The Wife simply could not have carried out full-time work after 1988 and ceased any paid employment by 1993.
The Wife’s ill health, pain and discomfort clearly affected her ability to carry out what might be regarded as regular home duties such as washing, vacuuming, washing-up, gardening and the like. The Husband must have carried out the bulk of these tasks although I accept the Wife did as best she could.
Towards the latter part of the marriage that burden would have fallen solely on the Husband as it is clear from 2000 the Wife’s health significantly deteriorated with ulcerations, failure of skin grafts and the like. The Husband was the only person available to take the Wife to medical appointments, hospital and ensure her medicines were maintained. The Husband had a full time job caring for the Wife towards the latter part of the marriage.
I find that the Husband has made through the 35 year marriage a significant financial contribution to the asset pool by using income earned by him for the support of he and his Wife and has made a significant contribution as home-maker due to the Wife’s ill-health. I find that the Husband’s contribution based entitlement in the past to be 65% and the Wife 35%.
This now takes me to the s.75(2) factors.
The Wife has no s.75(2) factors due to her sad death.
The Husband has significant s.75(2) factors. He is approaching retirement, and he has a modest superannuation of $50,000. He has a modest income from his company, he has a debt on the matrimonial home of $60,000 odd and two significant credit card debts. He will have difficulty in paying off that mortgage and those debts for the remaining time he has to work.
If I make any order for the Estate to receive any money the Husband has to either borrow and increase the indebtedness on the home or sell the home and rent. Either scenario will significantly affect his s.75(2) factors and give him a greater financial burden than he presently has. The size of this pool of divisible assets and the fact that the Husband only has these assets with which to support himself in the future is a very important factor in determining the extent of any adjustment to the surviving spouse.
This matter is distinguishable from decisions such as Ford & Marchant [2001] FamCA 1585, unreported 7 December 2001, and the decision of Smithers J in Menzies & Evans (1988) 12 Fam LR 519. In those cases there were significant assets to divide between the parties. In this matter there are almost insufficient assets for one party to support themself from let alone divide.
I find consistent with the decision of my brother Halligan FM that this is a matter where the facts in the Tasmanian Trustees case and the Parrott case much more closely resemble the facts before me.
The Husband at his age wishes to secure accommodation for himself. He will need to work very hard to reduce the present mortgage of $62,000 and pay off his credit cards debts which are approaching $20,000. In these circumstances his s.75(2) factors I find approach 30%. This gives him a contribution based entitlement of 95% of the asset pool.
Are these orders just and equitable in all the circumstances?
The asset pool for division is $361,775. Giving the Estate 5% of that asset pool is a sum of $18,000. The Estate has had $16,247. In order for the Husband to retain the home he must pay the estate $2,000.
I find these orders are just and equitable in the all the circumstances.
I certify that the preceding one hundred and fifty six (156) paragraphs are a true copy of the reasons for judgment of Henderson FM
Deputy Associate: A. Morris
Date: 28 April 2008
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